X Company currently buys a part from a supplier for $13.31 per unit but is consi
ID: 2574365 • Letter: X
Question
X Company currently buys a part from a supplier for $13.31 per unit but is considering making the part itself next year. This year, they purchased 3,300 units of this part; next year, they think they will need 3,800 units. Estimated costs to make the part are Direct materials Direct labor Varlable overhead Fixed overhead Total Per-Unit $3.28 3.66 4.00 5.40 Total $10,824 12,078 13,200 17,820 16.34 $53,922 Of the estimated fixed overhead, 8,375 are common costs that would be allocated to the part, the rest would be additional fixed overhead costs. X Company currently rents unused factory space for S2,600; it will have to use this space to make the part. If X Company continues to buy the part instead of making it, it will save Submit Answer Tries 0/5Explanation / Answer
CALCUALTION OF COST OF MAKING THE PRODUCT INSIDE THE FACTORY Particulars Amount Remarks Direct Materials 3.28 Variable Cost Direct Labours 3.66 Variable Cost Vraible Overhead 4.00 Variable Cost Fixed Overhead as Opportunity Cost 3.65 Opportunity Cost ($ 12,045 / 3300 Units) Total Cost per unit 14.59 Per unit Cost Less: Purchasing Price = 13.31 Per unit Purchase Price Save per unit if they continue to buy 1.28 Saving Per unit Total Units required for Purchase 3,300.00 units Total Saving = 4,224.00 CALCULATION OF TOTAL RELATED FIXED COST Total Fixed Cost = 17,820.00 Less: Common Cost = 8,375.00 Add: Opportunity Cost = 2,600.00 Total Fixed Cost = 12,045.00 Total Expected units to be produced = 3,300.00 units Cost per unit = 3.65 Answer If contiinue to buy the parts instead of making it then they will save = $ 4224
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